The ECB noted that the rise in expectations reinforces arguments against further interest rate cuts. According to the survey, three-year inflation expectations remained unchanged, while five-year expectations inched up to 2.2%.
Eurozone inflation stood at 2% in August and is forecast to climb to 2.3% in September. While ECB officials argue that price growth is under control, some remain cautious about potential risks, including the impact of rising defense spending and the possibility of inflation undershooting the target in the coming years.
ECB Governing Council member Peter Kazimir said earlier this week, “We can proudly say we have achieved our goal. Now we must remain patient and determined, and be ready to act when the time comes.”
Weak growth outlook persists
The survey also highlighted the fragile outlook for the Eurozone economy. Respondents maintained their projection of a 1.2% contraction over the next year. Unemployment expectations ticked up from 10.6% to 10.7%, while nominal income growth expectations rose from 0.9% to 1.1%.
Households’ spending growth expectations remained steady at 3.3%. Meanwhile, consumers forecast house prices to rise by 3.4% over the next 12 months. Expectations for mortgage rates were unchanged at 4.5%.
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